Tax-free childcare delayed until 2017

The launch of the government’s new tax-free childcare scheme has been delayed until 2017 following a ruling by the Supreme Court.

The scheme, which was originally due to launch in autumn 2015, has been delayed as a direct result of a legal challenge brought by the Childcare Voucher Providers Association (CVPA) and childcare voucher provider Edenred, which the Supreme Court unanimously dismissed at appeal.

CVPA and Edenred mounted a legal challenge against the government’s decision for HM Revenue and Customs (HMRC) to deliver the new tax-free scheme in partnership with National Savings and Investments (NS&I).

In light of the new scheme, NS&I had proposed that it would modify the terms of an existing contact with support services firm Atos IT Services, in order to include services related to the tax-free childcare scheme. CVPA and Edenred sought an order restraining the modification of the Atos contract.

An interim order halting the implementation of TFC was granted in October 2014.

The legal challenge was dismissed in November 2014, on the grounds that changes to the Atos contract did not breach EU procurement law. CVPA and Edenred appealed to the Court of Appeal, but this was dismissed in March 2015.

The Supreme Court heard CVPA and Edenred’s application for permission to appeal, and published its judgement on 1 July. Although the Supreme Court granted them permission to appeal, the court ‘unanimously’ dismissed the appeal. The interim order brought about in the case of Edenred (UK Group) and another v Her Majesty’s Treasury and others has now been lifted.

Damian Hinds, exchequer secretary to the Treasury, said: “We are now pressing ahead with the scheme as part of our ongoing commitment to support working families.”

Following the decision, CVPA spokesperson Simon Derby, said: “The CVPA brought about the case in order to ensure fairness in government procurement. The CVPA felt it had legitimate concerns about how the government decided to deliver its new tax-free childcare scheme and the effect this would have on parents trying to access childcare support.

“The CVPA accepts that these concerns have now been given a fair hearing and remains committed to working with HM Treasury, HMRC and NS&I to ensure the successful implementation of the new tax-free childcare scheme for parents.”

How will this impact parents and employers?

The current employer-supported childcare voucher scheme will now remain open to new entrants until tax-free childcare launches in 2017.

Parents can also elect to stay in the employer-supported scheme following the implementation of the new scheme, for as long as their employer continues to offer childcare vouchers and they signed up to receive vouchers before tax-free childcare came into effect.

The government has stated that the tax-free childcare scheme will provide up to £2,000 a year of childcare support per child to up to 1.8 million parents. Detailed information for the rollout of the scheme is yet to be released.

Iain McMath, chief executive officer of Sodexo Benefits and Rewards Services, said: “Once tax-free childcare is live, there will no longer be an opportunity for new parents to sign up to the existing employer-supported childcare voucher scheme, giving them no choice of the provision best suited to them.

“If parents enrol now, they will have the choice later. The good news is that the date for the implementation of tax-free childcare has now been delayed until 2017, giving parents more time to understand the changes, and confirm which option will be most economical for them.

“Financially, this will affect families differently. However, our research of over 5,000 working parents shows that two-thirds will be worse off under the new scheme, with many families and children ineligible for tax-free childcare.”